"Can you offer any advice on how to go from using credit cards for EVERYTHING to go to using cash and credit card for only bills and gas? Where did you begin? How did you create a budget?"Two years ago, when my husband returned home from his deployment, we realized that we needed to crack down on our spending in order to prepare for future tight times (i.e. grad school!). In his first month home, we spent around $600 on food (groceries and eating out). WOAH. That's for two people (plus whoever we had over for dinner). We were a little shocked.
So we sat down and worked out a budget. Here's how we began--the budget-from-scratch version!
First, we looked at our previous spending by dividing it into categories: groceries, eating out, gas, car expenses, and so on. Every penny spent was placed into a category.
This gave us a starting point for our budget. We knew we needed to cut down on our spending, but we also wanted something that we could realistically stick to. So we decided to decrease our spending gradually.
Our first budget was pretty loose. We set goals slightly lower than what we had currently been spending. At the end of the first month, we looked at each category again and evaluated how we had done. As we learned ways to cut our spending month by month, we also tightened our budget. I think it took around 4-5 months before our plan resembled our current budget. Working into a tight budget slowly prevented us from getting discouraged in the beginning.
Our budgeting tools were not complicated--just a ledger, paper, pen, bank statements, and a calculator!
|We bought this ledger at Wal-Mart and it has done the job!|
At this point, we attempted to use the online version of Quicken (now called Mint?) to track our expenses. After you tweak it a bit, it will categorize for you automatically. But certain numbers kept being ever-so-slightly off, which drove me crazy. We went back to numbers on paper. You know I'm old-fashioned!
Since we were consistently going over budget, we started contemplating the move to cash. My husband, however, was skeptical as to how he would carry around "cash envelopes" without having to move to some unmanly, bulky sort of wallet.
I'll share the solution to that looming problem and more on the logistics of moving to cash envelopes next week! Try not to bite your nails in suspense. I know you're on the edge of your seat. *wink*
I also wanted to throw this out there....I am no budgeting expert! There are many ways to set up and execute a budget, I'm just sharing what has worked for us.
What tips for setting up a budget (and losing the credit cards!) would you give my reader?
Linked to Frugal Friday.